By: Ted Sutton, Esq.

The Corporate Transparency Act (CTA) will apply to many different types of entities. It even extends to Homeowners Associations (HOA’s), including condominiums, community associations, and co-ops. This means that if you own an interest in an HOA, or you serve on the HOA board, you will need to report your information to FinCEN.

There are currently 23 exemptions under the CTA. One of which is the tax-exempt entity exemption, which includes three types of entities. The first is that the entity is an organization described in section 501(c) and exempt from tax under 501(a). Second, the entity is a political organization defined in section 527(e)(1). And lastly, the entity is trust described in section 4947(a).

Most notably missing under this exemption is Section 528 of the tax code, which applies to most HOAs. While there has been talk about exempting HOAs who file tax returns under Section 528, nothing has materialized as of yet. And we’re not holding our breath.

As it stands right now, most HOA’s will have to comply with the CTA. And in order to comply with the CTA, they will need to report some information to FinCEN.

The first piece of information is the “reporting company information,” which is the HOA body itself. The HOA will need to report its name, address, jurisdiction of formation, and its EIN Number.

The second piece of information is the “company applicant information”, which includes the person or business who is responsible for filing the information. The company applicant will need to report their name, birthdate, street address, and a driver’s license or passport.

The third piece of information is the “beneficial ownership information.” A “beneficial owner” is someone who owns at least 25% of the company, or someone who exercises “substantial control” over the company.

Some HOA boards have what are called “bulk owners.” And if these bulk owners own more than 25% of the HOA, they qualify as beneficial owners. As for the “substantial control” requirement, anyone who serves on the HOA board will have the required “substantial control” to qualify as a beneficial owner. In both situations, both groups will have to report their beneficial ownership information to FinCEN.

Another issue for HOA boards should look out for is when there is a change in ownership. Under the CTA, when there is any change in ownership or management, the HOA must report that information to FinCEN within 30 days. This may be a difficult task for many HOA’s, as some HOA’s have rapidly changing compositions. But once something changes, the clock starts ticking.